In retail, arguably no trend is more popular than dynamic pricing. As pressures mount on both storefronts and ecommerce spaces, many organizations are looking toward dynamic pricing as a way to keep up with the (giant) elephant in the room: Amazon.
But when using this weapon in the fight with Amazon, two important questions arise:
- How dynamic is dynamic?
- Is this a long term solution, short term fix, or destined-to-fail last ditch?
According to an article from InternetRetailer.com, Amazon’s definition of “dynamic” makes list prices look like stock tickers:
In a study during the 2013 holiday season of items in the electronics, toys and hardware categories, price-monitoring technology vendor Ugam recorded 9,715 online price changes on Amazon.com between Nov. 24 and Dec. 14, far more than the number of price changes made by such major competitors as Best Buy Co. Inc., Target Corp., Wal-Mart Stores Inc. and Toys ‘R’ Us Inc. (see chart on page 28.)
“No one can keep up with Amazon,” says Jenn Markey, 360pi’s vice president of marketing. She says Amazon might change a product’s price up to 10 times a day—more often on price-sensitive products, such as power tools, and less often for apparel. She says the most active retailers change prices daily on 15% to 20% of their product assortments.
Keeping up with the
Jones’ Amazons on dynamic pricing isn’t only unrealistic – it’s probably a retail siren song:
Amazon’s profit margin for a recent 12-month period stood at 0.38%, down from 0.51% for the prior 12 months and 0.99% for the same period a year earlier, according to the retailer’s financial reports.
Not many online retailers can survive on sub-1% profit margins. And that’s leading e-retailers to come up with new strategies that minimize the hit to their profits from their competitors’ dynamic pricing.
What if you could reap the benefits of dynamic pricing – exciting customers, maximizing transaction value, reducing showrooming costs – while differentiating your company from Amazon? What if you made pricing not only dynamic, but smart and personal.
Latest posts by Joe Shartzer (see all)
- Engaged Pricing Featured in Fortune - June 17, 2015
- Amazon’s “Make An Offer” Shows Customer, Data Reign Supreme - December 14, 2014
- 2014 Holiday Shopping Trends - December 7, 2014